Sterling pounds FTSE 100

Thursday, 3 November: Equity markets flip-flopped throughout the day in London, as news came down the wire that a ruling in the High Court boosted chances of a ‘soft Brexit’. This saw sterling strengthen to more than a two week high against the euro at €1.2853, and almost a month high against the dollar to $1.2494. The ruling saw the primary FTSE index retreat as the pound strengthened, whilst domestic revenues earners in the FTSE 250 index were driven higher. The FTSE 100 was down 0.80%, as the FTSE 250 closed 0.68% higher.

Before the 10am announcement, sterling was given a slight nudge higher by solid services PMI data. The currency edged higher as the purchasing managers’ survey on UK service sector activity beat the forecast 52.8, coming in at 54.5 in October and trouncing September’s 52.6 figure.

Later in the day, Bank of England Governor Mark Carney addressed news outlets with a change of tact. The press conference saw the BoE shy away from a second rate cut in the wake of the June vote, as it now foresees scenarios in which the key rate may be raised or cut in response to how the economic outlook unfolds – noting a ‘neutral’ bias. Sterling depreciation is expected to push inflation to 2.7% in both 2017 and 2018, above 2% in 2019 before easing off in 2020. The central bank has said it sees inflation on the horizon as a temporary phenomenon, and the utilisation of monetary policy carries too high a cost in output and jobs to justify intervention, as yet.

At the close, European indices were down with the FTSE 100 -0.80%, the DAX 30 -0.43% and the CAC 40 -0.07%.